Fuel Retailer Hopes to Lure Customers With Coffee

India’s private-sector fuel retailers are becoming more and more creative in finding new ways to make money.

Market leader Essar Oil Ltd., Thursday opened the first of a planned series of outlets of the Cafe Coffee Day chain at a fuel station on a highway in western India.

This is the latest in a long string of tie-ups for Essar, which in the past few months has teamed up with companies in sectors ranging from agro-products, banking and financial services, and food and beverage, with the aim of attracting more customers to its outlets.

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“The non-fuel business is a strategic business for Essar Oil, and we expect it to contribute significantly to the company’s growth in the coming few years,” said Essar Marketing Chief S. Thangapandian on Thursday.

This comes as Essar, like peer Reliance Industries Ltd., is struggling to make money from its main business: fuel sales.

This is because India’s state-run fuel retailers – backed by government subsidies – sell fuel at heavily discounted rats. This makes it difficult for private retailers to compete.

Diesel sold at outlets owned by private retailers costs about 35% more than that at state-run gas stations, while gasoline is about 5% more expensive.

The result: Very few customers visit Essar and Reliance outlets — for fuel, at least.

Essar, which has 1,400 operational outlets across the country, is trying to draw more customers by offering goods ranging from ice cream to tires to mobile phones in its outlets.

But things may change. A report released in June by a top-level Indian government panel has recommended an overhaul of the nation’s diesel subsidy system, suggesting extending diesel subsidies to private fuel retailers as well.

It’s too early to tell whether and when these changes will come into place.

Essar chooses to see the tank half-full, hoping that the government will eventually introduce fuel price reforms and give it a fair shot at the business.

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